The Supreme Court is hearing arguments about whether severance pay constitutes wages and is therefore subject to payroll tax. Severance pay is being paid for not coming to work, typically when someone is laid off or fired.

Rob Wood, tax lawyer in San Francisco, says that severance pay is clearly subject to income tax and that most people would say it should be treated like wages and therefore, subject to payroll tax. His belief is that the Supreme Court will say that payroll tax does apply to severance but he could be wrong as there are good arguments on both sides. He also sees this having a short-term impact, not necessarily a long-term one.